How Retirement Planning Evolves With Age

Many people dream of a healthy and financially prosperous retirement. While it can feel far off, especially for young adults, planning to achieve this is better to start in the present—not in the distant future—so you can maximize your savings through compound interest. Retirement planning, however, can appear different across various ages and stages of life, each with unique opportunities, financial priorities, and challenges.

In this article, we’ll offer an overview of the importance of age in retirement planning and how it influences approaches for people in their 20s, 30s, 40s, and beyond. Additionally, we’ll include insights from two financial advisors with retirement planning experience.

Why Age Matters for Retirement Planning

Age plays a critical role in retirement planning for several reasons. Perhaps most importantly, it has a direct influence on the amount of time to build savings and leverage the power of compound interest over decades. For instance, your potential runway is much longer in your 20s and early 30s than if you started seriously saving to retire in, say, your late 30s or 40s.

Rarely ever do life circumstances remain the same, however. There will often be goals and priorities that contend with your saving and investing plans. In your 20s, you may aim to buy a house or start a business. By your 30s, you may want to raise a family, requiring a balance of household expenses with consistent saving. This may continue into your 40s, 50s, or later, along with other potential costs such as putting children through college or caring for aging family members.

“Different life stages come with unique financial goals and challenges,” says Michael Santiago, CRPC^™, Senior Financial Editor at RetireGuide.com. “During your 20s, focusing on habit building and long-term growth is critical for the decades to come. In your 30s, balance competing priorities. By the time you get to your 40s and beyond, it’s best to shift toward stability and future income needs.”

Given evolving circumstances, Santiago suggests it’s best to follow a tailored approach when planning for retirement. In this way, you’ll be prepared for changes in your circumstances and be able to build steadily toward your goals. Consulting a financial advisor can also be a smart way to keep your plans on track.

In Your 20s: Building a Foundation

Upon entering adulthood, you’re likely in the early stages of your career. In this way, your 20s present a vital and unique opportunity to lay a strong foundation for retirement savings and develop good financial habits. While retirement seems a world away in your youth, saving as early as possible can enable you to enjoy compound interest—the growth of your investments and funds over time.

“Starting early and keeping your money invested is critical because the longer you have until retirement the more your investments can benefit from compounding,” says Stuart A. Schiffman, CFP^®, ChFC^®, founder and Managing Partner, Compound Wealth Advisors. However, he cautions that not doing so may mean “you will have to invest significantly more money later to meet your retirement goals,” which may not be easy if you have other expenses or challenges.

Contributing to tax-advantaged retirement accounts like 401(k)s or Roth IRAs is a helpful way to begin. For the former, some employers may offer matching contributions, which can help accelerate your saving power. Both vehicles also allow you to invest, which could also help you grow your savings over time.

Though it’s smart to put money into retirement vehicles, you may not have enough at this stage to maximize contributions and have funds left over for other uses. For example, you may also wish to put money toward more short-term goals and needs, such as paying off student loans, building an emergency fund, or housing. Therefore, it’s good to find a medium and save as much as you can for retirement while staying financially secure in the present.

In Your 30s and 40s: Revisions and Balance

As you reach your 30s and progress into your 40s, you may feel more settled in your career and life, building on the saving habits you established in your 20s. However, this also brings new priorities and responsibilities—such as homeownership, marriage, or raising a family—that require revisiting your retirement saving strategies.

As your life gets complex, it’s crucial to balance your short- and long-term goals. Setting a budget, according to Santiago, is one of the most effective ways to handle your present needs while having money left over for bolstering your savings.

“Creating a budget that allows you to accommodate retirement contributions alongside homeownership and family expenses is a good way to prioritize goals,” Santiago says. To keep your plans on course, he adds that “you can automate your savings and increase contributions as income rises.”

Another important step in your 30s and 40s is assessing whether you’re on track for retirement. Though it may seem far away, consider evaluating your progress, current strategy, and projected retirement income. Unless you feel comfortable doing this alone, it can be helpful to check in with a retirement planning professional. They can help you get a handle on the current state of your accounts and strategies, including balances, asset allocations, and how to optimize your budget to increase savings and manage day-to-day expenses.

In Your 50s and 60s: Evaluation and Risk Management

In your 50s and 60s, your financial priorities and strategies will continue to evolve. While you may still face competing goals and expenses, these decades are crucial for reviewing your progress and maximizing your saving opportunities as retirement draws closer.

In the waning years of your career, it’s key to evaluate progress toward your retirement goal, ideally with the assistance of a financial professional. If you’re not on track for the income you desire, you may need to ensure you’re maximizing contributions to accounts such as 401(k)s or IRAs. You can also consider using catch-up contributions once you turn 50, which allows you to put in extra money each year.

Another helpful step as you get into your 50s and 60s, according to Santiago, is “shifting toward more conservative investments.” Because your time horizon is shrinking by the year, you may need to switch to a preservation strategy comprising less volatile investments, such as fixed-income assets.

“When it comes to investing, depending on when someone wants to retire, they probably should be stepping on the brakes a little by increasing their bond allocations when they get to within five to seven years of retirement,” Schiffman explains, emphasizing the importance of preserving your capital. He adds that it can be a mistake to “withdraw money from a retirement account in a down market just as you are entering retirement” because “[that] money can never be recovered.”

As noted, however, your 50s and 60s are not without planned and unforeseen expenses and life changes. Career shifts, getting a divorce, or taking care of aging parents are all examples of events that may shake up your short-term personal and financial landscapes. As is important in your earlier adulthood, it’s wise to craft a budget that accounts for the present and future.

Because the decades leading up to your retirement can include significant changes to your investing and saving strategy, it’s a good idea to work closely alongside a financial advisor. Santiago highlights that they’re “critical contributors to retirement planning and should be consulted with to help you make the most out of your retirement,” noting that “they provide tailored plans by assessing income, goals, and risk tolerance” and can “guide you through life changes, optimize tax advantages, and ensure your plan can adapt to an evolving retirement landscape.”

Adapt With an Advisor’s Help

An effective retirement plan can take many shapes—not just from person to person, but also across the different stages of life. In your early years, you may focus on creating the foundation with small, consistent effort. On the other hand, you might find yourself refining or completely revising your strategy to meet new challenges or goals in later years. This evolution highlights the importance of regularly reviewing your plans and staying flexible as your life and priorities transform.

An experienced and trusted financial advisor can hold a pivotal role in each part of your retirement planning journey. They’ll be able to help you devise a comprehensive plan that fits your risk tolerance and needs across every chapter of your life, giving you valuable direction that can help you make sure you’re right where you need to be.

When choosing a professional, look for individuals who align with your goals and needs. The highest quality advisors also usually have credentials from reputable organizations or institutions and follow a fiduciary standard, putting your needs first and avoiding conflicts of interest. Examples of such professionals in the retirement and financial planning industry include:

• Certified Financial Planner (CFP)
• Chartered Financial Analyst (CFA)
• Chartered Financial Consultant (ChFC)
• Chartered Retirement Planning Counselor (CRPC)
• Retirement Income Certified Professional (RICP)

To find a financial advisor who can help you plan for retirement, you can use a free matching tool, such as this one. After answering a few short questions about your needs, circumstances, and goals, it will connect you with a vetted fiduciary professional.